Lessons From Greece for Everyday Business People

Earlier this week, fellow Fool Morgan Housel published a piece that should be required reading, especially for college students about to head out into the real world. Morgan's article focused on lessons learned from Greece for everyday people.

Among those lessons: Don't rely on someone else to keep you financially afloat, things change in fast and unexpected ways, and austerity is never popular.

If we dig into the historical facts surrounding Greece and the eurozone, I believe there are three key lessons for everyday business people as well.

Before doing anything, have an exit strategyOne of the first lessons any budding entrepreneur is taught is that they must have an exit strategy from their business before getting started. Not only does an exit plan help you envision life after your business, but it also forces you to more specifically define your goals.

In many ways, if the eurozone countries had taken this advice, we may not be in the mess we're in now. When the idea of forming a one-currency union started gaining traction in the 1990s, a list of fiscal requirements was drawn up (more on those below). This was important because the fiscal health of each country's government varied a great deal.

In forming the Maastricht Treaty in 1992, eurozone countries laid down the rules. But when the conference forming the treaty ended, one huge subject had been overlooked. The topic of what would happen if a country wanted out -- or was to be kicked out -- was avoided, largely for political reasons. As Christopher Waller of the St. Louis Fed put it, "It's basically like this: you can't talk about divorce on your wedding night."

That leaves us in the lurch we're in now, with eurozone leaders functioning largely with a make-it-up-as-you-go strategy.

Either stick to your rules or change them, but don't make exceptionsAs I stated above, there were a number of fiscal requirements a European nation had to meet to gain acceptance in the eurozone. Below is the list of those requirements when Greece was admitted, as well as the country's performance versus those requirements.

Requirement

Greek Performance on Admission

Long-term interest rate within 2 percentage points of the average of the three lowest EU members

High interest rate exceeded limit at 9.9%*

Inflation within 1.5 percentage points of the average of the three lowest EU members

High in inflation rate exceeded limit at 5.4%*

Must have been in the exchange-rate mechanism (ERM) for two straight years without devaluation

Did not participate in ERM*

Deficit-to-GDP ratio must not exceed 3%

Ratio exceeded limit at 3.7%

Debt-to-GDP ratio must not exceed 60%

Ratio exceeded limit at 103%

Source: St. Louis Fed. *Figures for 1998, two years before gaining acceptance.

As you can see, Greece failed to meet all five of the requirements. I would contend that there's nothing wrong with changing the rules as a situation changes. The thing is, those changes need to be negotiated and agreed upon by all members.

In Greece's case, an exception was made -- and that sets a very dangerous precedent. By allowing for exceptions, the eurozone members didn't go through the mental exercises of asking themselves if they would be willing to change the limits for all member countries.

If member countries did change the requirements, I would suspect there'd be far less of a hard line being taken by larger economies like Germany and France when it comes to bailing Greece out. The changing of the rules would have been an admission that they knew what they were getting into. But since an exception was made, a toxic fiscal government was allowed to enter, and essentially poison, the eurozone.

Know who you're dealing withBeing in business with someone is all about trust. If you can't trust your business partners, your enterprise is as good as dead.

In November of 2004, Greece admitted that it had been lying to euro countries for over a half-decade. The deficit-to-GDP ratio had not been below 3% -- as required -- since 1999. Of course, had there been an exit strategy in place, eurozone members could have jettisoned the country then and there. Instead, Greece has steadily added to worry about the union's sustainability for close to a decade.

Sadly, there's little that can be done to go back and correct these three crucial errors. For potential business owners (and government officials) out there, acting on these three lessons could eliminate 90% of the problems you might run into.